[4] Countries and Regions with Surplus Agri-Food Production
Introduction
The mission of Wageningen MFC is providing good food for everyone in an urbanizing world. Food security is always one of the major fields of our business. We help our clients solving food security problems, with a co-design approach and implementing the six principles of the MFC concept.
As the current war in Ukraine and the sanctions being imposed on Russia accelerate the rise of agri-food commodity prices and disruption of agri-food logistics and supply, national and regional food security is once again becoming a priority on different countries’ agenda.
Wageningen MFC developed diagnostic instruments to position a country or region on a scale ranging from completely import-dependent to completely self-sufficient (and even exporting substantial surpluses). We categorise four types of countries or regions, based on our project experience and our research on food security:Countries and regions with unavailability of land and/or unsuitability of climate,
Countries and regions with unavailability of land and/or unsuitability of climate,
Countries and regions with massive population pressure,
Countries and regions with a disrupted link between urban and rural development,
Countries and regions with surplus agri-food production.
It is necessary to mention that every region or country has its unique situation, and that the solutions that we are co-designing are tailor-made for improving a specific country or region’s food security to surpass a critical threshold for survival in ‘worst case’ situations, whether it is caused by extreme (or worsening) climate conditions, lack of space, high demographic pressure, general economic under-development, or geo-political tensions.
Here, we elaborate our general view and strategies for each type of country or region to improve food security.
Type 4: Countries and regions with surplus agri-food production
The surplus countries and regions generally have an abundance of land and a well-developed agriculture. They can produce not only sufficient food for themselves, but also supply for the rest of world. Large parts of Europe, Oceania, Russia, and much of the Americas are typical examples. The relation is mutually beneficial. On the one hand these surplus countries and regions are the pillars of global food security; on the other hand, for themselves, agriculture and food exports are a pillar of a prosperous economy. To make this work, the global logistics network and supporting infrastructures are crucial.
However, this mutually beneficial system is not without problems, and problems that are expected to worsen in the future. Already now, in many surplus countries and regions, (1) economic benefits are not what they potentially could be. In the future this gap could widen due to (2) loss of production capacity caused by soil degradation and climate change, or due to (3) disruption of logistic relations caused by pandemics or geo-political conflicts. As a worst-case surplus countries and regions could even run into food security problems themselves. One might be optimistic that strategies to improve food security for deficit countries and regions, as introduced in the previous three stories will make the world as a whole less dependent on the surplus capacity of exporting countries and regions, and on the balancing power of the global logistic system. But for now, this is a long-term perspective. For the present and the near future, to maintain the surplus production capacity of exporting countries and regions, and to keep the logistic system running smoothly, are essential if we want to avoid serious food security problems at a global level.
To reduce the gap between actual and potential benefits of large-scale exports of agri-food products, several solutions are available: (i) deepening vertical integration, to integrate more steps within one supply chain; (ii) extending horizontal integration to integrate more different supply chains by using one another’s rest- and by-products; (iii) shift towards higher added value products and application of more advanced technologies; (iv) improved world market access, by improving agrologists system and infrastructures, and product quality; and (v) creating more synergy between plantation-style production and local producers. To read more, please click here.
To deal with developments that threaten production capacity, two issues are important: (i) preventing and improving soil degradation, this relates to horizontal integration because of the opportunity to replace chemical fertiliser by organic matter rich animal manure; and (ii) finding answers to climate change effects, especially drought, this relates to more advanced technologies, especially water-saving land-independent production of fruit and vegetables; flooding – less important in our package; more pest and disease pressure – again relates to advanced technologies/closed land-independent systems.
As an answer to increasing logistic disruptions (of two types: (i) caused by pandemics; and (ii) caused by increasing geo-political tensions/conflicts) our approach is mainly to strengthen the self-sufficiency potential of deficit countries and regions – hence the countries and regions with unavailability of land and/or unsuitability of climate, with massive population pressure, and with disrupted link between urban and rural development. However, the link between the local/country/regional level logistic system/infrastructure with the global system remains very important, focusing on rural transformation centres; local/regional sourcing for agroparks; consolidation centres; export centres – as nodal points in integrated multi-modal transportation networks.
Here, we elaborate our general strategies and solutions to bridge the gap between actual and potential economic and social benefits for surplus countries and regions:
I. Vertical integration
Let’s take Brazil as an example, which is famous for its soy and maize supply. The value created by exporting these commodities is rather limited compared to processed products. Moreover, they are often associated with images of deforestation and soil degradation. In fact this damage to the environment should even be deducted from the export profits, how can Brazil increase the added value they can capture, at the same time reducing environmental harm in a way consumers are demanding? Vertical integration is one of the answers to this question. The basic idea for this Brazil case is to integrate soy and maize production with dairy production and processing. Dairy production and processing create more added value than feed production, by including this activity Brazil can capture this extra value for itself, instead of leaving this to other regions such as Europe or the US. Moreover, manure from animals, in this case from dairy cows, is a valuable product. As a source of minerals and organic matter manure is superior to chemical fertiliser for efficient plant growing and healthy soil, also drastically reducing the cost of fertiliser purchase on the world market. It also avoids/remedies the present manure disposal problems of animal production far from feed production, such as the current Dutch Nitrogen crisis.
Soy and other crops are fed to animals, and the produced milk is processed on site. In the end, only final products are delivered to the global market. This approach increases the number and quality of jobs, since human resources are needed not only for soy production, but also for feed processing, as well as dairy production and processing. The full added value from (soy and dairy) production and processing stay with the producers. Moreover, shorter transport lines reduce both costs and climate impacts. More efficient use of land and other resources reduces the overall demand for land (both for dairy and soy in this case), which can free extra land for other purposes like nature and biodiversity conservation. This is crucial, since many food surplus countries and regions are also important to nature and biodiversity conservation.
II. Horizontal integration
The basic idea of horizontal integration is to integrate different supply chains, and use one supply chain’s by-products as production material for another supply chain. The WMFC team aims to apply this approach to improving the current beef production in Latin American countries and regions, such as Paraguay and Uruguay. Currently, beef production is strongly associates with mass deforestation, the loss of carbon storage, decreasing water availability, and soil and water saturation with nutrients, which in the end not only destroy the environment, but also threaten the beef production itself. Local producers are searching for approaches to balance their environment management and economy performance.
Project demand for food of animal origin till 2050 (millions of metric tons)
Our general approach is to introduce dairy production in this case as well, and horizontally integrate dairy with beef production. This gradual shift from beef to beef-with-dairy also fits better in the future trend of a healthier diet. Due to this trend, it is expected that the global dairy market has better general future perspectives (see figure below) than the beef market.
Instead of being the prime driver, beef becomes a “collateral product” from the dairy chain. The joint use of slaughterhouse facilities can serve the processing of animals from both the dairy chain (steer calves and adult milk cows that are no longer productive) and from the meat cattle chain. Efficient joint-manure management and feed production can be applied in a similar way as for the Brazil case to improve the efficiency of land use and feed production, as well as soil health, and nature conservation.
III. Higher added value products and modernizing agri-food production
In the example of Brazil, the integration of feed and dairy production and processing more than doubles the value of exported products. In the example of combining beef and dairy production and processing, also integrating slaughterhouses, the increase in added value is even higher.
For both examples, to further improve resource use efficiency, advanced technologies are needed. For instant, to use state-of-the art stable systems for accommodating animals. These solve the problem that generally in these regions the climate is too warm for highly productive dairy cows and meat cattle. The WMFC team has designed a patented technology to provide climatized stables to provide the most favourable conditions for animal health and productivity, at the same time reducing CO2 production and even eliminating methane and ammonia emissions. These technologies are crucial for climate change adaptation and mitigation, as will be demonstrated in the next blog.
Next to modern agri-food technologies (we call them hardware), relevant Education and Training (we call them software) is at least as important, to provide qualified teams and staff for operation and management. To meet the requirements of its projects, the WMFC team offers tailor-made Education and Training programs together with our technology producers and knowledge institutes. In our projects, integrated design of hardware, software, and orgware (such as communication, legislation and certification, and policies) is one of our basic design principles.
IV. Improvement of world market access
Mexico supplies a large share of (fresh) agri-food products to metropolitan markets in the United States and Asia. Mexico has a large variety of fresh products and has the challenge to sort and distribute them in an efficient way. To improve world market access, the WMFC team have conducted a series of projects for Mexican federal and state governments and local producers, with two angles – to improve the physical access by efficient infrastructures, and to improve the quality and quantity of products through following international standards.
The first step was to look from the federal level at Mexico’s agri-food logistic network and Metropolitan Food Clusters (MFC) structure, to select focus regions for further development, identify crucial agrologists infrastructure, and propose investments in market potential.
The State of Chiapas was one of the regions selected for MFC development. A regional plan was drafted for the spatial MFC-structure, including Agroparks (AP) with high-tech land independent production, Consolidation Centers (CC) and Rural Transformation Centers (RTC, cir in figure below); other infrastructure such as roads and harbours; as well as bio-diversity conservation.
The Consolidation Centers play the role of collecting large loads of products and split up and recombine these into smaller, but more varied loads based on specific demands of each retailor. This requires storage and distribution space that can provide different climate conditions for each type of products. In a consolidation center, supporting functions such as financing, packing, or auction are also relevant.
In the Chiapas project, detailed plans for several components in MFC have been elaborated, such as a Conceptual Master Plan for an Agropark and Consolidation Centre in Tapachula, representing the spatial layout of different functions. Production and processing, agri-food logistics, facilities for a circular economy, education & training programs, as well as a business plan were covered by this master plan. The design also includes a harbour on the coast of Pacific Ocean, which can directly export products to the Asian market without intermediate transportation.
V: Balance between agriculture plantations and small producers
Agriculture plantations are often located in countries with a relatively poor economy but with suitable climate, land, water, labour and other resources. In many cases, plantations have better access to finance, technologies and other resources such as water than local small producers. Products from plantations are usually exported to countries from which investments in the plantations originate. As a consequence, benefits for countries and regions where plantations are located are mostly very limited, especially from the perspective of food security. These food security challenges overlap with the Type 3 counties and regions, which we elaborated earlier.
Large-scale global market-oriented agriculture should be more beneficial for the countries and regions where the production happens. To realise this, the same recipes are applicable as given for Brazil as well as for Paraguay and Uruguay: vertical and horizontal integration. So more added value can be retained and generated, and more employment can be created for local (small) producers or residents. Education and training for qualified staff and efficient operations and public communication are also important to attract the participation of local producers.
VI: Knowledge and experience sharing
Traditionally, due to the combination of historical factors and climate and soil conditions, some parts of the world can feed themselves and go even beyond that. Northwest Europe, especially the Netherlands is an example. This is also where the concept of MFC originated.
Not only are the current agri-food knowledge and technologies from these parts of the world more advanced also their past mistakes during the modernizing process of the agri-food sector, offer valuable experiences for other countries and regions. Therefore, exporting these technologies, knowledge, and experiences is equally important to exporting food. The benefits of doing so are not only generating economic benefits for the exporting countries, but also help the rest of the world to keep innovating in order to make food provision both more secure and more sustainable.
The WMFC team has started its in-depth research of agri-food practices and cooperation in Northwest Europe over twenty years ago. We have applied the research outcomes in different types of countries and regions together with technology providers and knowledge institutes. The ambition is to help provide good food for everyone in an urbanising world and create benefits to the countries and regions where the food is produced, from a social, economic and environmental perspective.
Here, we deal with problems caused by soil degradation and climate change, and with disruption of logistic relations:
Soil degradation has many causes: salination due to unsuitable irrigation practices, overusing of chemical fertilisers and pesticides, neglecting the need for crop rotation and fallowing, using too heavy machinery, and so on. A crucial factor is to keep organic matter at a healthy level, which can be attained by integrating animal production with production of land-dependent crops as elaborated in the Brazil example above. Next to safeguarding the quality and fertility of the land, maintaining constant high productivity, the integrated approach also provides producers with a higher income, and reduces the total amount of land required.
The biggest problem for surplus regions is increasing water shortage due to climate change. Generally, zones with high precipitation levels move to higher latitudes, causing droughts in traditional production areas such as Kazakhstan, Australia, and large parts of the US and Brazil (see map below). IPCC predicts that for different climate scenarios for Latin America temperature rise might be between 2℃ and 6℃ while as much as 50% of present arable land is threatened by desertification making it unsuitable for agriculture[1]. Water saving technologies and smart water management are crucial, such as precision irrigation, limitation of ground water extraction, and finally a shift to sheltered systems. It is inevitable, however, that part of the present surplus areas will lose their exporting capacities, or will even turn into deficit areas, calling for the need to develop present low-productive areas where future rainfall is expected to increase, to take over as exporters.
The case of Mexico as described in the above, is one of the examples how the design of agro-logistic networks and agro-parks might strengthen climate resilience. Especially the central and northern parts of the countries are expected to be seriously hit by climate change. There is an urge to shift the production from open fields to modern sheltered systems as much as possible. The benefits of doing so are greatly increased water efficiency, better protection against extreme weather events, and a much higher diversity of products answering the demands of constantly changing markets and leading to much higher profitability too.
Source: Putnam, A. E., & Broecker, W. S. (2017). Human-induced changes in the distribution of rainfall. Science Advances, 3(5), e1600871.
Geo-political conflicts with their disruptive effect on logistic relations, hit importing countries in the first place, but of course exporting countries are affected as well. While countries in the Middle East and Northern and Eastern Africa go hungry because of wheat exports from Ukraine are drying up, wheat is heaping up in Ukrainian warehouses. As another example of exports being affected by disrupted logistic relations, during the COVID-19 pandemic many surplus countries felt obliged to restrict their deliveries to the world market in order to build strategic reserves and stabilise prices for their own population.
References:
[1] Magrin, G., C. Gay García, D. Cruz Choque, J.C. Giménez, A.R. Moreno, G.J. Nagy, C. Nobre and A. Villamizar, 2007: Latin America. Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden and C.E. Hanson, Eds., Cambridge University Press, Cambridge, UK, 581-615.
